What Is a Trade Account?
A trade account is a formal business relationship between a buyer and a wholesale supplier. Unlike a standard retail purchase, a trade account unlocks wholesale pricing, credit terms, and often access to exclusive product ranges. Opening a trade account usually requires you to demonstrate that you are a legitimate business — not a consumer buying for personal use.
How to Open a Trade Account
The process varies by supplier, but most require:
- Proof of business registration (company number, sole trader registration, or equivalent)
- A VAT or tax registration number where applicable
- Your business address and trading history
- Bank or trade references to support a credit application
- An initial minimum order to activate the account
Once approved, you'll typically receive a dedicated account number, a trade price list, and details of your payment terms.
Key Elements of a Wholesale Contract
When a supplier provides a formal wholesale agreement, read it carefully. The following clauses are especially important:
Minimum Order Quantities (MOQs)
Your contract will specify the minimum order per transaction, which may be different from the minimum required to open the account. Some suppliers also set annual minimum purchase thresholds to maintain account status.
Pricing and Price Change Clauses
Trade pricing is not always fixed. Suppliers may adjust prices due to raw material costs, currency fluctuations, or market conditions. A good contract will specify how much notice you receive before a price change takes effect — typically 30 to 90 days.
Payment Terms
| Term | Meaning |
|---|---|
| Net 30 | Full payment due 30 days after invoice date |
| Net 60 | Full payment due 60 days after invoice date | 2/10 Net 30 | 2% discount if paid within 10 days; full amount due by day 30 |
| Proforma | Payment required in full before goods are dispatched |
| COD | Cash on delivery — payment due upon receipt of goods |
Exclusivity Clauses
Some wholesale agreements grant you exclusivity within a defined territory or sales channel. While this can be a competitive advantage, ensure the territory is realistic and that the clause doesn't lock you into onerous purchase commitments in exchange for that exclusivity.
Returns and Defect Policies
Understand exactly what happens if goods arrive damaged or fail to meet specification. Most suppliers offer a defect allowance (e.g. credit for a small percentage of damaged units) but won't accept returns for items you simply couldn't sell. Negotiate return windows upfront for seasonal or fashion-sensitive stock.
Termination and Notice Periods
A wholesale agreement should clearly state how either party can end the relationship. Look for reasonable notice periods (30–90 days is standard) and clarify what happens to outstanding orders or credit balances on termination.
Negotiating Better Trade Terms
Don't assume wholesale terms are non-negotiable. Suppliers expect buyers to ask for better conditions. Leverage points include:
- Committing to larger or more frequent orders
- Paying promptly or early (use early payment discounts where offered)
- Placing orders well in advance, reducing the supplier's forecasting risk
- Offering marketing exposure or prominent shelf placement
When to Get Legal Advice
For significant or long-term wholesale relationships — particularly where exclusivity, large financial commitments, or international trade are involved — it's worth having a commercial solicitor or attorney review the contract before signing. The cost of a legal review is almost always less than the cost of a contractual dispute.